Builder changes tune on paying One Rincon fees

S.F. DEVELOPMENT

Movers from STS (Specialized Transport Services) unload furniture for Designer Joseph Hittinger who is designing a two bedroom condo on the 59th floor of One Rincon in San Francisco.

Movers from STS (Specialized Transport Services) unload furniture for Designer Joseph Hittinger who is designing a two bedroom condo on the 59th floor of One Rincon in San Francisco.

Photo: Eric Luse, The Chronicle

Photo: Eric Luse, The Chronicle

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Movers from STS (Specialized Transport Services) unload furniture for Designer Joseph Hittinger who is designing a two bedroom condo on the 59th floor of One Rincon in San Francisco.

Movers from STS (Specialized Transport Services) unload furniture for Designer Joseph Hittinger who is designing a two bedroom condo on the 59th floor of One Rincon in San Francisco.

Photo: Eric Luse, The Chronicle

Builder changes tune on paying One Rincon fees

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The developer of One Rincon, the dominant new high-rise condominium tower just north of the Bay Bridge, now says he plans to pay the city-imposed fees that were central to gaining approval to build the skyscraper.

Developer Mike Kriozere's reversal came days after telling The Chronicle that the 62-story condo project was not making expected profits and funds probably would not be available to pay all of the fees he negotiated in 2005.

This week, Kriozere's spokesperson said he plans to pay the $5.4 million in fees that would be spent on things like rent subsidies, job training programs and community development in the South of Market area. Those fees are in addition to millions of dollars in other city development surcharges that Kriozere has paid.

The announcement, however, didn't stop Supervisor Chris Daly from introducing legislation Tuesday that would force future Rincon Hill developers to pay the fees before any residents move into new buildings.

Currently, the $5.4 million in fees is not due until the developer decides to request a final occupancy certificate, which could happen years after the building is completed.

Kriozere has approval from the city to build a second, adjacent tower, but his comments on the fees have strained his relationship with some members of the city's Planning Commission, which he still needs to work with regarding other development issues and infrastructure projects.

Also, on Thursday the Planning Commission will decide whether to withhold $1.6 million that the city owes Kriozere for some street improvements related to the development.

"We were scheduled to give him (Kriozere) the money to do one thing and he was refusing to pay us for another, so I wanted to give the commission a chance to consider that," said Zoning Administrator Larry Badiner.

In 2005, Daly, whose district includes Rincon Hill, struck a deal with developers who owned land in the area west of the waterfront and north of the Bay Bridge.

Rincon Hill was the focus of a rezoning plan intended to convert the industrial area into a dense residential neighborhood within walking distance of downtown. In addition to One Rincon, five other residential projects are pending in the area.

Controversial deal

As part of the rezoning, building heights were increased from 250 to 500 feet in selected locations, and developers were allowed to build more units per building than had been permitted.

In exchange for the height increases and in recognition of the impacts the new development would have on the nearby community, developers agreed to pay fees for infrastructure improvements in addition to standard affordable housing and school charges.

On top of those fees, Daly persuaded the developers to chip in approximately $5 million per project to stave off the loss of affordable housing and small businesses due to higher land values that would be created by development at Rincon Hill. The new projects could not go forward without the approval of the Board of Supervisors, and it was believed that Daly might kill the plan.

Some called the deal extortion; Daly claimed that it was historic and raised "the bar in terms of looking at responsible development in San Francisco."

But Daly's new legislation on Tuesday was an effort to correct flaws in the original agreement, which essentially allowed the developers to pay the $5 million fees when they chose.

Legal issues

There also is some question about whether the deal was legally binding because no formal study was ever conducted to demonstrate the relationship between the new development and the fees that Daly demanded.

"It seems to me that Kriozere was testing the waters to see if he could renegotiate (the fees), and that's not happening," Daly said. "I do want to clean up the legislation. The developers negotiated for this language, and now I know why."

In a letter that Kriozere sent Monday to the media, public officials and One Rincon residents, he said that the fees scheduled to come from the first One Rincon tower would be paid after the building receives its final safety certificates.

Tenants were allowed to move into One Rincon under temporary city building certificates in January and approximately 70 percent of the tower's 376 luxury units and 14 townhouses have been sold. Final certificates are not issued until the city undertakes a final inspection at the request of the developer.

Kriozere was not available for comment Tuesday. His spokesperson declined to say where the funds for the fees would come from or exactly when they would be paid.